BofA to Double Outreach Staff but Fixing Legacy Issues to Take 3 Years

Bank of Amer­ica said Tues­day that it is step­ping up efforts to help dis­tressed home­own­ers before they fall into fore­clo­sure, but com­pany offi­cials warned share­hold­ers that same morn­ing that BofA’s $1 tril­lion port­fo­lio of prob­lem assets — loans that are already delin­quent and those risky home lend­ing prod­ucts that the com­pany has taken off the shelf – will take three years to work through.

In 2011, Bank of Amer­ica plans to dou­ble its bor­rower out­reach staff, open new regional cen­ters to directly assist local home­own­ers, and increase col­lab­o­ra­tion with non­profit hous­ing coun­selors. Already this year, Bank of Amer­ica says it has increased its out­reach to regions that have expe­ri­enced the biggest impact from the down­turn in the econ­omy and hous­ing mar­ket.  Skep­tics of this announce­ment find the mea­sures to be noth­ing more than BofA try­ing to save its own skin.  “The mea­sure is really just to save them from dis­as­ter.  They will, of course, try to por­tray them­selves as help­ing home­own­ers, but we all know this is just a spin.  If your bank is hold­ing out a help­ing hand, be wary.  It usu­ally means that they have some­thing to lose, and they will try to cut deals which most ben­e­fit them.  To make sure you are not being taken advan­tage of, always have a good mort­gage mit­i­ga­tion attor­ney on your side.  When we are talk­ing about some­thing as impor­tant as your home, they are well worth the money.  The New York leg­is­la­ture has vowed to make Legal Aid avail­able for peo­ple fac­ing fore­clo­sure because they say “the banks have attor­neys and so should you”.”, com­mented one expert. 

In Feb­ru­ary, the com­pany opened home­owner assis­tance cen­ters in Seat­tle and Chicago. It plans to open four new regional cen­ters near Wash­ing­ton, Los Ange­les, Orlando, and San Fran­cisco in the next two months. The bank’s assis­tance cen­ters hosted meet­ings with 12,000 finan­cially dis­tressed cus­tomers in 2010.

Bank of Amer­ica has already par­tic­i­pated in 26 com­mu­nity out­reach events since Jan­u­ary, in asso­ci­a­tion with regional and national non­profit part­ners such as HOPE Now and Neigh­bor­hood Assis­tance Cor­po­ra­tion of Amer­ica (NACA). The com­pany has com­mit­ted to par­tic­i­pat­ing in more than 15 NACA “Save the Dream” events this year.

In addi­tion, the bank has launched a series of bor­rower out­reach events exclu­sively for Bank of Amer­ica Home Loans cus­tomers, com­plet­ing events in Phoenix, Chicago, and Detroit already this year, meet­ing with more than 3,300 cus­tomers. Another 10 inde­pen­dent events are planned around the coun­try in the first half of 2011.

Bank of Amer­ica says it works with more than 2,000 non­profit hous­ing orga­ni­za­tions across the coun­try and is active in train­ing hous­ing coun­sel­ing groups on its mod­i­fi­ca­tion pro­grams and processes. A ded­i­cated home­own­er­ship reten­tion unit helps facil­i­tate the mod­i­fi­ca­tions process for non­profit groups.

The bank named Rebecca Mairone as national mort­gage out­reach exec­u­tive to spear­head these ini­tia­tives going for­ward. Mairone will report directly to EVP Terry Laugh­lin, who leads the newly cre­ated legacy asset ser­vic­ing divi­sion, formed last month when BofA split the respon­si­bil­i­ties of ser­vic­ing prob­lem loans and per­form­ing loans into two sep­a­rate busi­ness units.

While the com­pany is beef­ing up efforts to keep home mort­gages from slip­ping into the “prob­lem” cat­e­gory, the large vol­ume of loans that already fit into this group will take the com­pany three years to unwind, accord­ing to Laugh­lin.  Speak­ing at Bank of America’s investor con­fer­ence on Tues­day, Laugh­lin explained that his legacy ser­vic­ing orga­ni­za­tion will focus on loss mit­i­ga­tion res­o­lu­tions for the company’s dis­tressed asset port­fo­lio. All loan mod­i­fi­ca­tions, short sales, deeds-in-lieu, fore­clo­sure pro­ceed­ings, and REO dis­po­si­tions, as well as set­tling investors’ loan repur­chase claims, fall under Laughlin’s jurisdiction.

To illus­trate the scope of the chal­lenge ahead, Laugh­lin explained that Bank of America’s total ser­vic­ing port­fo­lio – per­form­ing and non­per­form­ing assets – amounts to $2.1 tril­lion, or about 14 mil­lion loans.

Forty-eight per­cent – 6.7 mil­lion loans worth $1 tril­lion – will trans­fer to Laughlin’s legacy ser­vic­ing divi­sion. The rest will remain under the Bank of Amer­ica Home Loans umbrella, which ser­vicers mort­gage cus­tomers who remain current.

The legacy port­fo­lio that falls to Laugh­lin includes all loans that are 60 or more days delin­quent, as well as dis­con­tin­ued loans prod­ucts such as sub­prime, Alt-A, Interest-Only, and Option-ARM loans, although a num­ber of the mort­gages in the dis­con­tin­ued bucket are per­form­ing, Laugh­lin says. The vast major­ity of the mort­gages being trans­ferred to the legacy ser­vic­ing unit were orig­i­nated between 2004 and 2008.

“We gonna get after this, we’re going to do it the right way, and we’re going to put it to bed over the next 36 months,” Laugh­lin told BofA share­hold­ers. “We’re mak­ing good progress, and we’re already deploy­ing strate­gies to more rapidly resolve these port­fo­lios that bal­ance bor­rower, mort­gage investor, and share­holder interest.”